Correlation Between Walker Dunlop and Empire Metals

Can any of the company-specific risk be diversified away by investing in both Walker Dunlop and Empire Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walker Dunlop and Empire Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walker Dunlop and Empire Metals Limited, you can compare the effects of market volatilities on Walker Dunlop and Empire Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walker Dunlop with a short position of Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and Empire Metals.

Diversification Opportunities for Walker Dunlop and Empire Metals

0.07

Correlation Coefficient

Walker Dunlop  Empire Metals

Significant diversification

The 3 months correlation between Walker and Empire is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Walker Dunlop is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walker Dunlop are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Empire Metals go up and down completely randomly.

Pair Corralation between Walker Dunlop and Empire Metals

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 0.83 times more return on investment than Empire Metals. However, Walker Dunlop is 1.2 times less risky than Empire Metals. It trades about 0.01 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.26 per unit of risk. If you would invest  11,016  in Walker Dunlop on September 4, 2024 and sell it today you would earn a total of  5.00  from holding Walker Dunlop or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Walker Dunlop  vs.  Empire Metals Limited

Walker Dunlop

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Walker Dunlop and Empire Metals

The main advantage of trading using opposite Walker Dunlop and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walker Dunlop position performs unexpectedly, Empire Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Empire Metals will offset losses from the drop in Empire Metals' long position.

The idea behind Walker Dunlop and Empire Metals Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.